When traders buy or sell cryptocurrencies on a decentralized exchange (DEX), they pay a gas fee to execute or facilitate the trade. It is a payment made to the blockchain networks for executing or facilitating the trades.
These networks use many computers or such devices, called nodes, to check and record each transaction. Apart from the manpower, these computers need electricity and other resources to work. Gas fees reward the people running these computers for their effort and resources. The fee changes based on the demand for the network. When many traders want to do transactions at once, they fight for limited processing power. This competition increases the fees. Picture a highway during rush hour—more cars create slower traffic and pricier tolls. The same logic applies here. Popular trading windows or major market events overload the network, shooting the gas fees through the roof.
The type of transaction and the amount of work required for it are other factors that influence gas fees. Every transaction requires a certain amount of computational power. Basic token exchange requires less processing than complicated smart contract interactions. The fancier your transaction gets, the steeper your gas fee climbs.
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A trader can pay a higher fee to ensure that his transaction is treated as a priority. Increasing the fees enables the network to process transactions more quickly. Giving less means that transactions may take time to be executed.
Different blockchains also have different rates. Ethereum has built a reputation for wallet-draining fees, which sent traders towards alternatives like Polygon or Binance Smart Chain. These networks crunch transactions quickly and cheaper as they juggle with fewer users or run different validation systems. Market conditions also play a role. Bull market conditions lead to trading frenzies, increasing gas fees. Bear markets usually deliver give breathing space with lower fees.